A survey of the international use of yen

This paper focuses on the yen's role as a currency of invoice and financial asset. Further aspects of the internationalisation of the yen (e.g. non-resident borrowing in yen) are not dealt with directly. The relatively small importance of the yen in trade invoicing suggests that the "transaction balance" portion of yen holdings has been small. This argument is further reinforced by the fact that the growth of non-resident holdings of yen assets has been closely related to the development of the exchange rate, coupled with the low level of yen sight accounts with Japanese banks. This implies that the advantage that the Japanese economy would enjoy from internationalisation is small, since the major advantage to the home country of an international currency is that it can fund part of its imports with non- or low-interest bearing liabilities. Furthermore, the exchange rate has been made more vulnerable to external shocks, although direct disturbance on of the domestic financial market has so far not been too serious.